Transfer law

This month's topics include the effect of the TUPE regulations on contractual terms and conditions.

The key developments

* The fact that a contractor's services are not guaranteed does not prevent there being an economic entity capable of transfer (case 1).

* A group of temporary workers who were taken on as part of a much larger workforce did not amount to an economic entity capable of transfer (case 2).

* A change to contractual terms as a result of a transfer can be lawful as long as it is agreed by the employee and is to his/her benefit (case 3).

The basic legal rules

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) state that, when a business is transferred from one employer to another, the employees doing the work should also transfer on their existing terms and conditions. To come within TUPE, there has to be a relevant transfer of an activity that amounts to a "stable economic entity".

The employer before the transfer is referred to as the "transferor", and the employer to whom the business transfers is the "transferee".

Under TUPE, most legal liabilities (such as outstanding legal cases being taken against the transferor) transfer to the transferee.

An employee covered by TUPE has the right to continued terms and conditions, including redundancy terms. Additionally, there is no time limit after which TUPE protection no longer applies. However, this does not mean that changes to transferred employees' terms and conditions can never occur.